Stocks that may transition out of the long-term additional surveillance measure (ASM) stage 1
Stocks that may transition the Additional Surveillance Measure (ASM) is a regulatory framework introduced by SEBI in 2018 to closely monitor highly volatile stocks in the Indian stock market. This framework aims to identify securities with significant price fluctuations, trading volume changes, and overall volatility, placing them under increased scrutiny.
The main objective of the ASM list is to enhance investor awareness and caution when dealing with such stocks, ultimately ensuring market integrity and safeguarding retail investors from speculative risks. It is important to note that the framework is primarily focused on surveillance rather than punitive action against listed companies.
Criteria for Inclusion in the ASM List
Stocks are selected for inclusion in the ASM List based on specific criteria established by SEBI and stock exchanges. These criteria include factors such as close-to-close price variation, high-low variation, client concentration, market capitalization, volume variation, delivery percentage, number of unique PANs, and price-earning ratio (PE). By evaluating these parameters, the framework effectively assesses volatility and risk, facilitating the efficient monitoring of potentially unstable securities.
Stages of the ASM Framework
Stage 1:
During Stage 1, securities are identified based on specific entry criteria, such as price volatility and trading patterns. Once these criteria are met, a 100% margin requirement is enforced from the third trading day (T+3).
Stage 2:
Stocks already in Stage 1 can move to Stage 2 if they meet additional conditions over five consecutive trading days. These conditions include a high close-to-close price variation and a significant concentration of trading volume from the top 25 clients.
In Stage 2, the price band is reduced to the next lower level, and the margin requirement remains 100% from T+3, further controlling risk and discouraging excessive volatility.
Stage3 :
By implementing the ASM framework, SEBI aims to promote transparency, stability, and investor protection in the Indian stock market. This proactive approach to monitoring highly volatile stocks underscores the regulatory commitment to maintaining a fair and orderly trading environment for all market participants.
Stage 4:
Securities that have been in Stage 3 for five consecutive trading days must meet the same criteria in Stage 4, which includes high price variation and client concentration.
The primary action in Stage 4 involves the settlement of transactions on a gross basis, requiring the full value of the transaction to be paid. A 5% price band is imposed, and the margin requirement remains at 100% for all clients. These measures ensure even stricter controls to manage risk and prevent further volatility in the stock.
Below is a list of long-term ASM stocks that may exit from Stage 1:
Garden Reach Shipbuilders & Engineers Ltd
Diffusion Engineers Ltd
Vintage Coffee & Beverages Ltd
The Investment Trust of India Ltd
Windlas Biotech Ltd
Duncan Engineering Ltd
Manorama Industries Ltd
Ceinsys Tech Ltd
Prudent Corporate Advisory Services Ltd
The Anup Engineering Ltd
In conclusion, if security meets the required criteria after completing 90 trading days in the Long-Term Additional Surveillance Measure (LTASM), it will be eligible to exit the ASM list. The stage review is conducted weekly to assess if the conditions for exit are met, ensuring continuous monitoring of market behavior.
By implementing these measures, the market aims to maintain stability and protect investors from excessive risk.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.